Corporate Corruption

March 25, 2005

Former WorldCom chief Bernard J. Ebbers' criminal conviction for orchestrating the biggest accounting fraud in history sends an important message to corporate America about a new era of accountability.

Jurors rejected the lame defense by a chief executive known as the ``telecom cowboy'' that he had no knowledge of an $11 billion accounting discrepancy that plunged the company into bankruptcy.

The level of fraud at WorldCom was staggering. According to testimony, Mr. Ebbers instructed his chief financial officer to ``hit the numbers'' that Wall Street expected, even if it meant concealing expenses on a massive scale to deceive investors. Prosecutors said Mr. Ebbers desperately wanted to bolster the stock price because he was using his WorldCom shares as collateral for $400 million in personal bank loans.

Jurors found Mr. Ebbers guilty on all nine counts, including securities fraud, conspiracy and filing false documents. He likely will serve a long prison sentence -- fitting punishment in view of the damage he caused. Tens of thousands of WorldCom employees lost their jobs, while investors lost billions of dollars.

Mr. Ebbers is one of a string of corporate chiefs charged with corruption in recent years. Former HealthSouth CEO Richard Scrushy is on trial in an alleged $2.7 billion fraud, and former Enron Chairman Kenneth L. Lay's trial will open early next year. These men, too, invite laughter by saying they had no idea about the skullduggery on their watch.

That excuse will not fly in the future because the Sarbanes-Oxley Act of 2002 now requires chief executives to personally attest to the validity of figures in financial filings.

Investors became giddy during the go-go years of the 1990s, when technology stocks soared to unheard-of heights. The boom seemed too good to be true. In fact, it was. Mr. Ebbers and other scoundrels -- sometimes backed by crooked auditors and investment bankers -- were concocting massive frauds while enriching themselves. Their corruption and thievery wiped out the livelihoods and savings of countless people, and stained the image of corporate America.

Those behind such unparalleled crimes deserve appropriately long prison sentences.